Volkswagen Canada halts some sales after CEO apologizes for emissions scandal

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By Peter Henderson, THE CANADIAN PRESS

TORONTO: Volkswagen Canada has told dealers to stop selling diesel-powered vehicles involved in an emissions-testing scandal that has drawn the ire of American regulators.

Spokesman Thomas Tetzlaff said in an email that the voluntary move comes as the Canadian division of the automaker is working with its American counterpart and parent company in Germany to resolve the issue.

Volkswagen CEO Martin Winterkorn apologized on Sunday following revelations last week that the company had rigged U.S. emissions tests for about 500,000 diesel cars.

Tetzlaff said nearly all of the company’s Volkswagen-branded diesel cars are included in the stop sale order in Canada, including the Jetta, the Golf and the Beetle.

No mention was made of what is to happen with cars already on the road.

On Friday, the U.S. Environmental Protection Agency said Volkswagen used a device programmed to detect when the cars are undergoing official emissions testing. The software device then turns off the emissions controls during normal driving situations, allowing the cars to emit more than the legal limit of pollutants.

Volkswagen marketed the diesel-powered cars as being better for the environment.

The affected models are the diesel versions of the 2009 through 2015 Jetta, the 2010 through 2015 Golf, the 2013 through 2015 Beetle, the 2012 through 2015 Passat, and the 2009 through 2015 Golf Wagon.

Those models account for four-fifths of the Volkswagen brand’s sales in Canada, although the company does not disclose how many of its sales are for diesel-powered cars.

The EPA said VW’s Audi luxury brand had also attempted to circumvent emissions regulations on the Audi A3, but Volkswagen Canada did not say the Audi was a part of the order.

VW has already halted sales of some vehicles in the U.S. and pledged to co-operate with regulators in an investigation that could, in theory, see the company fined up to $18 billion.

Environment Canada said its air pollution standards are in line with those of the EPA and that it collaborates with the American agency on emissions testing.

However, it did not say whether the company would face any sanctions in this country when asked in an email.

“The department is in discussions with its U.S. EPA counterparts to further examine this issue and assess potential implications for Canada,” department spokesman Mark Johnson said in an email.

“Environment Canada takes matters related to environmental pollution very seriously.”

In his apology, Winterkorn said the company had “broken the trust of our customers and the public.”

Industry analysts said the VW CEO faces difficult questions in the coming days, particularly when the company’s board is scheduled to meet Friday.

“At the moment, I’d be surprised if Winterkorn can ride this out, but in Germany there’s often a slightly slower process in these matters,” said Christian Stadler, a professor of strategic management at Warwick Business School who researches the car industry. Stadler said that if VW were a U.S. company, then the CEO would have gone more or less immediately.

Guido Reinking, a German auto expert, said that for a company to engage in such blatant trickery the company’s top executives would have to be informed.

Winterkorn, an engineer by training, led research and development across the VW group from 2007. He became chairman of the management board the same year.

“It’s almost impossible to imagine that he didn’t know about this special way of programming the engine,” Reinking told German television station n-tv.

The EPA has ordered VW to fix cars sold in the U.S. at its own expense but said car owners do not need to take any immediate action. The EPA insisted that the violations do not pose any safety hazard and said the cars remain legal to drive and sell while Volkswagen comes up with a plan to recall and repair them.

However, it said the cars pose a threat to public health.

The EPA also indicated the scale of the fines that could be imposed on VW. It said the carmaker could be hit with up to $37,500 per vehicle for the violations _ a total of more than $18 billion. The California Air Resources Board is also investigating.

Volkswagen, which recently edged out Japan’s Toyota to become the world’s top-selling automaker, has had a difficult year, its share price having fallen from more than 250 euros to just above 133 euros amid signs of faltering sales in the U.S. and China.

And the hit to its reputation from the emissions revelations could hamper VW’s efforts at a sales rebound in the U.S.

Meanwhile, if other regulatory authorities decide VW has a case to answer, then the carmaker faces the potential for even bigger fines.

“The news so far revolves around the U.S. impact, but if European investigators become interested the potential penalties could multiply very quickly,” said Chris Beauchamp, senior market analyst at IG.

_ With files from the Associated Press

 

© 2015 The Canadian Press